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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

This Kenyan village is a laboratory for the biggest basic income experiment ever By Dylan Matthews @dylanmatt dylan@vox.com

Mar 6, 2017, 10:30am EST

Residents celebrating the news that their village will receive a basic income for twelve years. | Vox / Oliver Ochada

Jacklin Okotch Osodo, age 29, lives in a small hut with her son and daughter in a tiny village on the southwestern edge of Kenya. Their home is part of a larger compound centered on her husband’s father and his four wives. She is expecting her third child very soon. Her husband lives in Nairobi, and every week and a half or so he sends back money: about 200 shillings ($2) in lean times, about 500 ($5) when things are going better. I asked Jacklin if she’s ever gone the whole day without eating; she has. I asked when the last time this happened was. She told me, “Last week.” But when the nonprofit GiveDirectly told her that it would give her, and every other adult in her village, a basic income payment of 2,280 Kenyan shillings (about $22) a month for the next 12 years, she knew immediately that she would not spend the money on food. Her plan is to save the money and then use it to pay her children’s school fees.

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

“My dream is to educate my son because I didn't have the opportunity,” she told me in Luo, the local language. “I do not want my son to be in the situation that I was in and the things that I have been through.” She says she wants him to grow up to be an engineer, or a doctor. Jacklin’s choice flies in the face of a persistent myth propagated about the poor, both in the developing world and in rich countries. This myth says that poor people can’t be trusted with money — that it’s better to give them concrete things like food or bednets or school supplies. And yet Jacklin is being given cash with no strings attached, and choosing to use it in the way that she feels will most benefit her family in the long run. She isn’t frittering it away, or wasting it, or hoarding it for herself. The myth of the irresponsible welfare recipient just doesn’t apply. Jacklin is part of a massive study by GiveDirectly, which will provide a universal basic income set at the Kenyan poverty line to dozens of impoverished villages, totaling more than 6,000 people, for 12 whole years. Thousands more will receive short-term aid, bringing the total helped to more than 26,000. It’s the biggest study of cash to date. If it succeeds, the results should put myths about the profligate poor to rest. Basic income: an introduction

Vox / Joe Posner

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

The government should trust poor people. This, more than anything, is the idea behind universal basic income, which over the past few years has gone from a fringe curiosity to a serious proposal. It’s been debated by the Indian and US governments and backed by the incumbent party’s presidential candidate in France. Universal basic income is a program where every person gets a regular cash payment from the government — no matter their income, no matter whether they work or not. No strings are attached. The attraction of the proposal is clear. By definition, it ensures that no one in a given town, region, or country falls below a certain poverty line. And while it would give cash to the rich and poor alike, the rich’s share would be recouped by the higher taxes necessary to pay for the scheme. The main impact would be on society’s poorest — and the impact for them would be significant. So why hasn’t it been implemented as a matter of policy in a single country to date? There are any number of factors, but none is more crucial than the simple fact that voters and politicians don’t trust the poor. That helped kill a nearly successful effort in the early 1970s to establish a guaranteed minimum income in the United States. A bill made it through the House, but in the Senate, conservatives in both parties were worried that giving the poor more money would make them shiftless. They demanded strict work requirements, watering down the plan until it eventually died altogether. Their view became the conventional wisdom, and the idea of solving poverty by just giving poor people money faded from the debate. Now GiveDirectly is putting that conclusion — that the poor cannot be trusted — to the test in a big way. GiveDirectly’s basic income experiment in Kenya is the biggest trial in history, and the longest-running. The experiment’s scope is massive, and its design is rigorous, so that the trial can produce clear results from which policymakers the world over can learn. Implementation is straightforward. GiveDirectly uses M-Pesa, a ubiquitous mobile money system in Kenya, to deposit the basic income money, so it doesn’t have to bother with checks or coins or bills. M-Pesa is a bit like Venmo, if Venmo were used by everyone everywhere in the US; a recent study found that 96 percent of Kenyans live in a household where at least one person uses M-Pesa. When driving down empty roads in rural Kenya, you’ll frequently see shacks that advertise M-Pesa services.

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

If the experiment works, the policy consequences could be immense. A successful trial by GiveDirectly could spur action by governments in places like Nigeria and Angola, and prompt further cash programs from the World Bank, USAID, and other aid organizations. I should say upfront that I’m invested — intellectually but also literally — in this working out. I’ve been following debates about basic income for about 12 years, since reading an article about it in the magazine Dissent. In that time, it’s gone from a nice utopian concept to ponder to something benefiting thousands of people. And I’ve been donating to GiveDirectly since 2012, when it was exclusively doing one-time lump-sum cash transfers in Kenya rather than prolonged experiments like this. (I should also say I didn’t visit as a donor - Vox paid for all the reporting in this story.) So I’m eager to see if its biggest project to date works out — and if it can help put to rest, in developing countries and the rest of the world alike, the myth that the poor cannot be trusted with their own lives. Everyone has a different plan for how to use the money

Benter in her greenhouse. | Vox / Joe Posner

If you go around Jacklin’s village, you’ll find dozens of different answers to how villagers plan to use the new money. School fees are a popular choice, for both parents and grandparents alike. So is investing in a business.

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Samson Wandolo Adera, a retired police officer in his 60s with a big, bushy white beard, and his wife Benter Were Wandolo, are cases in point. They live in one of the nicest homes in the village, with a large yard, a solid foundation, and multiple rooms. They're not rich by any means; they maybe bring in $9,000 or so a year, well under the American poverty line. But they have enough money and have bought enough equipment to have some business ventures going. Benter owns and operates a greenhouse, with two employees (she unashamedly, in front of them, informed me that one makes 600 shillings a month and the other makes 800, leading the former to look a bit miffed). She grows tomatoes, a far more profitable crop than the maize most other farmers in the village grow. To get around the occasional droughts the village suffers, she uses a large concrete cistern on her property. A staffer drives her husband’s tractor to nearby Lake Victoria, fills a tank attached to the tractor with water, and then drives back to dump the water in the cistern. Benter says she’s looking forward to using the GiveDirectly money to expand the greenhouse: to build a more solid roof, and maybe hire another employee or two. Samson has his own hustle going. In his living room, under a poster of the reggae artist Burning Spear (he says he put it up for the young men he employs in his business ventures), he explained his plan to go into cage fishing at the lake. He’d already bought the fish and just needed to buy feed, and the feed — per a catalog he showed us — is expensive. So he’s going to use the GiveDirectly money for that part of the operation.

Samson explains his fish-farming plan in his living room. | Vox / Joe Posner https://www.vox.com/policy-and-politics/2017/3/6/14007230/kenya-basic-income-givedirectly-experiment-village

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Benter and Samson aren't using the money for basic necessities, in other words. Samson already pays for his grandkids to go to school, and he can even get banks to loan him money. That's how he bought his fish cage. Instead, the money serves as a grant to their small businesses — and while they’re certainly not the neediest people in the village, that influx of cash could wind up employing more people, or raising their wages, or otherwise contributing to the economic development of the community. This is one of the big benefits of giving cash. In poor countries, at least, it tends to not result in poor people working less, but in them working and earning more. A cash program in Uganda found rates of return in the 30 to 49 percent range — that is, for every dollar granted, the recipient earned 30 to 49 cents more through other means. Benter and Samson aren’t an exception; a lot of recipients use the money to expand their business and make more money overall. For that purpose, the “income” part of universal basic income could prove a hindrance. A number of people I spoke with in the village expressed a preference for fewer, bigger cash grants, rather than regular monthly receipt of less money. “The monthly thing is not bad, but I think a lump sum payment would be better. That way you can do a big project at once,” said Edwine Odongo Anyango. He’s a 29-year-old father of two who, when I met him, was subsisting on odd jobs around town because the fall’s drought had made farming impossible. “It’s hard to save little amounts for a big project.” (There’s a bit of controversy on this point; Jacklin and a number of other residents expressed a preference for monthly payments.)

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

Edwine in his home. | Vox / Oliver Oscar Ochanda

Edwine tells me that he and a group of 10 or so friends have formed a savings compact. Each month they’ll all pool a portion of their basic income payments and give the combined amount to one member. They’ll cycle through all the members month to month, so everyone gets an equal shot. That means the person getting the money will have 10 times as much to spend or invest as if they’d gone it alone. Edwine is planning to spend his share on a mixture of school fees, when his kids come of age, a mattress, chairs, and maybe, in the future, on building his own house, so he can move away from the family compound. He says he also might use some to pay for vocal lessons at the local Catholic church. He may be a jack-of-all-trades and farmer now, but his dream is to teach music. Across Jacklin, Benter, Samson, and Edwine, I heard plans to use the money to pay for: School fees Greenhouse covering Fish feed Worker wages Tomato seeds Mattress Chairs Building a house https://www.vox.com/policy-and-politics/2017/3/6/14007230/kenya-basic-income-givedirectly-experiment-village

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

Vocal lessons

That’s just four people, and a truly expansive array of ways to allocate the cash. It’s no surprise, then, that every recipient I talked to expressed appreciation for GiveDirectly’s choice to offer them cash as opposed to an in-kind payment. Jacklin had previously worked with an international NGO called Plan International that aims to “advance children's rights and equality for girls.” In practice, though, the group provided her with only a notebook and a pencil. That was fine, so far as it goes — but it wasn’t really what she needed for her kids at that time. Getting cash, by contrast, lets her budget according to her own needs. The cash revolution

The town meeting announcing the experiment. | Vox / Oliver Ochanda

When GiveDirectly was starting out in 2010, one of its earliest backers was the group Uncommon Philanthropy. At that point, GiveDirectly was just four people volunteering their time and transferring their own money: development economists Michael Faye, Paul Niehaus, and Jeremy Shapiro, and Rohit Wanchoo, who works in private equity. (Faye currently runs the group, while Niehaus serves as president and Wanchoo sits on the board.) Mark Lampert, the founder of Uncommon Philanthropy, picked the group as the winner of a $5,000 charity competition after a philanthropy consultant on his team flagged it from https://www.vox.com/policy-and-politics/2017/3/6/14007230/kenya-basic-income-givedirectly-experiment-village

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the pile of applications as an unusually terrible idea. “Her initial reaction was generally, ‘You just can’t give money to people!’” Lampert recalls. But that didn’t stop the group from winning the prize, and then another $100,000 in early funding as well. Another early supporter was Jacquelline Fuller, who runs Google.org, Google’s philanthropy arm. Fuller has said that when she first pitched the idea of supporting GiveDirectly to one of her bosses, he replied, "You must be smoking crack." That was about how fringe an idea just giving cash, no strings attached, was as recently as 2011, when GiveDirectly started accepting donations. The US and Canada had experimented with negative income taxes (a form of basic income that phases out with income) in the 1970s, but the idea quickly died out. In the 1990s and 2000s, some developing-world governments experimented with conditional cash transfer programs, with Brazil’s Bolsa Familia and Mexico’s Oportunidades gaining particular acclaim. But those programs were sold specifically as ways to encourage families to make decisions government liked, such as enrolling children in school or getting vaccinated. If those conditions weren’t met, the cash wasn’t available. But giving cash unconditionally in poor countries was another thing entirely. It was different, and it was exciting. That was a major reason I got on board and started donating to GiveDirectly in August 2012. The group seemed like it was trying something genuinely new. What’s more, it was trying something with basically unlimited potential to grow. Most of my giving up to that point had been to the Against Malaria Foundation, which helps distribute insecticidal bednets in sub-Saharan Africa. It’s a great charity, and I still donate to it — more than I give to GiveDirectly, in fact. But you can only scale that up so much. At some point, hopefully, you run out of people who need bednets. By contrast, it’s basically always going to be helpful to take money from rich donors in developed countries and give it to very poor people in low-income countries. GiveDirectly could do that for decades and decades and still be making a difference. And because the cash is distributed via cellphone, scaling up is very doable.

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

The biggest attraction, though, is the radical deference the cash approach gave to the people it helped. I give to Against Malaria because there’s a large body of evidence suggesting that bednets are underutilized, even compared with a baseline where you gave people enough cash to buy them. You could make a similar argument for deworming efforts. But those are exceptions. Charities almost never have good evidence that what they want to spend money on is better than what poor people would choose to spend the money on if they just got the cash themselves. I certainly don't trust myself to know what the world's poorest people need most. I've been profoundly lucky to never experience the kind of extreme poverty that billions of people worldwide have to endure. I have no idea what I would spend a cash transfer from GiveDirectly on if I were in Jacklin’s shoes. Would I spend it on school fees? Maybe! Or maybe I'd use it to supplement my food budget. Or save for a new house. I really don’t know. You know who does have a good sense of the needs of poor people like Jacklin? Poor people like Jacklin. They have a very good idea of what they need. And you should only give something other than cash if you are confident you know the recipients' needs better than they do. One of the pitfalls of development aid to poor countries is that the research on what is and is not effective is constantly in flux. Two years ago, a huge debate stirred about whether mass deworming programs worked; the weight of evidence still supports them, but there are vocal dissenters. If you’re trying to find the most effective cause to donate to, that uncertainty is worrisome. There’s still uncertainty with cash. But the reputation of cash in the development world has grown steadily over the past few years, as study after study after study showed that poor people don’t spend cash transfers on tobacco or alcohol, and that receiving cash doesn’t discourage them from work. A review of 19 different cash transfer studies found evidence that giving cash decreases spending on tobacco and alcohol. A Liberian program targeting cash to young men, many of whom were former combatants and former or current criminals, found that very little of the cash was spent on tobacco, alcohol, or drugs (4 percent), and that income rose and crime fell in the short run after receipt of cash. A review of cash studies by renowned MIT development economist Abhijit https://www.vox.com/policy-and-politics/2017/3/6/14007230/kenya-basic-income-givedirectly-experiment-village

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Banerjee and colleagues found no evidence that cash reduces work effort (and some studies, like the Uganda one mentioned above, find it increases work). And visiting Jacklin, Benter, Samson, and Edwine’s village made some of the worries about cash seem just silly. It would make people work less? Really? Tell that to Benter’s greenhouse workers and, perhaps, to the third worker she might hire. It would make them waste their money on tobacco and drugs? The only things you could even remotely characterize as luxuries that I saw Jacklin buy when I accompanied her to a market outside of the village were sugar and a bit of molasses. Cash works. But it’s not a panacea.

Jacklin buying food at a market. | Vox / Joe Posner

If five or six years ago, proposing unconditional cash grants made people ask if you were smoking crack, today the idea has become mainstream in some quarters of the development world. And it’s earned itself some vocal critics. Cash skeptics are insistent that in-kind grants of things like food or cattle are preferable in certain cases to granting cash. "Food tends to be consumed more wisely and sparingly; cash, on the other hand, can easily be misused," Jean Drèze, an eminent Indian development economist, once wrote. "Food is shared equitably within the family, while cash can easily be cornered by selfish individuals."

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

Heifer International — a charity devoted to in-kind grants of cattle — and its president, Pierre Ferrari, have been particularly outspoken about the limits of cash. A lot of these critics’ worries can be, and have been, empirically debunked. If food prompts better decision-making than cash, why did a randomized trial in Mexico find that people given cash ate just as healthily as people given food? If cash can easily be misused, why do rigorous studies of cash transfer programs show no evidence of that happening? If the gains from cash are hoarded by selfish heads of household, why are children whose household receives a GiveDirectly transfer 42 percent less likely to go a day without eating, according to a rigorous randomized evaluation of the group’s prior, lump-sum transfers? But these skeptics do make one point that is unquestionably correct and important: Cash cannot be a substitute for basic public goods. In the town I visited, there’s no electricity, no running water. The road leading into town is not paved. (Jacklin’s 15-year-old son Tony says his goal is to go to university and become a civil engineer so he can fix the roads.) The schools are not free. These are problems that require further investment, investment that should come from the government rather than aid groups. No one understands this problem better than Wilfred Kennedy Aswan Abagi, the village elder. That’s a formal government job; he doesn’t receive a salary (he’s a carpenter by trade), but he serves as a mayor-like figure and meets regularly with other village leaders in the region. He has encouraged his fellow villagers to set aside a bit of their GiveDirectly money — maybe a few hundred shillings a month out of the 2,280 — to pay for infrastructure projects: improving the roads, building an electrical link to nearby towns, setting up a pipeline for water, and so forth. But that’s something that he, as a government leader, is in a position to organize. GiveDirectly, by contrast, is not there to supplant or replace government action; indeed, the government runs several cash programs of its own, and has been very supportive of and cooperative with GiveDirectly. This is not to say that GiveDirectly didn’t receive pushback when it first arrived; Jacklin heard rumors from neighboring villages that the group “wants blood from the locals in exchange for money and that after receiving the transfer, a big snake would come to your house and eat you and your whole family.”

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This Kenyan village is a laboratory for the biggest basic income experiment ever - Vox

The distrust all but evaporated when it became clear the group only wanted to give out money. What this experiment will tell us

Kennedy, the village leader. | Vox / Joe Posner

The GiveDirectly project is obviously a huge deal for the 26,000 people it’s assisting. But it’s also an epochal social scientific event. Jishnu Das, the lead economist at the World Bank's Development Research Group, compares it to the RAND Health Insurance Experiment or the Oregon Health Study — both hugely influential efforts that have profoundly shaped health policy in the years since they were conducted. The sheer size of the experiment means it could capture ways in which cash drives poverty reduction that more limited studies can’t. Das raises the possibility that the basic income could provide startup capital that villagers need to move to cities, where they can earn more money and sustainably escape poverty. “We don’t even know the pathways through which this cash could lead to improvements down the line,” he notes. The experiment will also enable researchers to see if communities can pool resources together to pay for public goods for themselves, like Kennedy suggested he wanted the https://www.vox.com/policy-and-politics/2017/3/6/14007230/kenya-basic-income-givedirectly-experiment-village

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villagers to do. “You can decentralize a lot of local public good provision,” Das notes. “That, for me, would be very interesting.” Berk Özler, another senior economist at the Development Research Group, has argued the GiveDirectly experiment might actually not go far enough. In a blog post last year, he wrote that GiveDirectly shouldn’t have had a “pure control” group that receives no aid; obviously, he argued, getting cash is going to be better for you than not getting cash. What they should have done, he wrote, is compare a basic income against more targeted cash transfers to particularly needy individuals or villages, as well as to a successful poverty reduction program in Bangladesh that transferred livestock to ultra-poor recipients. That would’ve cost a great deal more money, and likely required the World Bank or another donor to chip in millions, but it would’ve enabled a more apples-to-apples comparison of different development approaches. In an email, Özler raised another concern with the design of the experiment. A realistic basic income scheme, he argues, would be paid for by replacing existing government subsidies or social benefits. GiveDirectly, by contrast, is just adding on money on top of existing government programs. "Their experiment will have to make none of the tough decisions that the government would have to make," he writes. Abhijit Banerjee, the MIT development economist, doesn’t think much of this critique. He is part of a team that will be evaluating the GiveDirectly basic income experiment, along with Princeton professor and former Obama chief economist Alan Krueger, and fellow MIT economist Tavneet Suri. Banerjee notes that most of the world’s poor don’t get access to any anti-poverty interventions, either from the government or a nonprofit. The choice for them isn’t “cash or livestock.” It’s “cash or nothing.” Even without another program to directly compare, he says, the GiveDirectly experiment can answer important questions, like, “What is the impact of UBI on someone, who, like a lot of the world's poorest people, has no access to any social support program? Does she change her life in a positive direction, or will it simply, as many people in the Indian media have suggested, make her lazy so that the net income gain is small?”

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“None of this is to say that we would not want to run a race between UBI and a more lumpsum approach,” he continues. “If you know someone who would want to pay for it, let us know.” Even without that hypothetical benefactor, the GiveDirectly experiment will tell us a great deal. It provides an opportunity to see just how much extremely poor villages can be transformed by a very simple, and extremely scalable, intervention. If, in 12 years, Jacklin’s village looks basically the same as it does today, that tells us something about the limits of cash as a sustainable way to escape poverty. But if it looks different, if there’s dramatically more economic activity and education, if health outcomes look better and more people have jobs — that tells us something too. And one thing it tells us is that you could do a whole lot worse than direct foreign charitable dollars straight into the hands of the poor, to spend as they see fit.

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Rohit Wanchoo | VOX  

Rohit Wanchoo, of GiveDirectly and Alpine Grove Partners, featured in VOX.

Rohit Wanchoo | VOX  

Rohit Wanchoo, of GiveDirectly and Alpine Grove Partners, featured in VOX.

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